We continually receive great questions from our members, employer and brokers. Below are some of the recent questions, with answers related to health reimbursement arrangements (HRA), asked that we wanted to share.

For more information on Health Reimbursement Arrangements (HRA), we encourage you to visit our HRA section of the website or contact us.

Answer: Beyond the normal PHI response, I think it is good to review all the new(er) compliance regulations.

1. Healthcare reform has turned plan documents on their head with changes, updates and all out removal of parts ofthe Code. Unless the group has someone writing their document every year, it is guaranteed it will not meet the requirements in an audit or protect them in a lawsuit.

2. Summary of Benefits & Coverage (SBC) has been difficult for most to produce and even some TPAs have stoppedadministering these plans because of their concern of not doing it correct. $1000/day violation penalty.

3. Medicare reporting, some plans must report to CMS every quarter and to become an eligible entity is not easy, infact TPAs are doing just this for employers. The non-compliance penalty is $1000/day.

4. PCORI fee reporting starts this year and most be done on Form 720. Is the employer calculating this correctly thisyear, when the fee changes next year and then again on ongoing years? $100/day/violation penalty.

How are they penalized? Healthcare Reform is creating the trigger for that.

Once an individual receives a subsidy, the state exchange is obligated by federal mandate to investigate the employer tofind if further penalties are to be assessed. And you can bet there will be A LOT of people trying to get their "free" benefits, i.e. subsidized premium, creating lot's of triggers.

Question: Are long term care premiums (LTC) an eligible expense?Answer:

Health Reimbursement Arrangement? NoCafeteria Plan or Flexible Spending Account? NoHealth Savings Account (HSA)? Yes, but only up to Taxpayer's Age At End of Tax Year -

<40 year old maximum eligible is $360>40 but less than <50 maximum eligible is $680>50 but less than <60 maximum eligible is $1,360>60 but less than <70 maximum eligible is $3,640>70 maximum eligible is $4,550

Medicare Reporting is a requirement for some HRA plans but don't worry, Polestar Benefits, as part of standard service package has this covered...here are some of the basics. . An HRA is a Group Health Plan (GHP) and subject to the Medicare Secondary Payer (MSP) provisions (see: 42 CFR §411.101) and to reporting under Section 111.

Effective October 3, 2011, only HRA coverage that reflects an annual benefit level of $5000 or more is to be reported (initially this threshold was $1000). HRAs of an annual benefit amount of less than $5000 are exempt from reporting. Funding deposit amounts rolled over from the previous year’s coverage must be included when calculating the current year’s annual benefit amount.

The new $5000 Annual Benefit Reporting Threshold applies to all new or renewing HRA coverage which becomes effective on or after October 3, 2011. RREs reporting existing coverage will continue to do so at the present threshold until the employer’s HRA benefit period is rewed. Download the CMS Document. .

Guidelines for HRA Discrimination Testing - Health Reimbursement Arrangements (HRA) have rules beyond Healthcare ReformHRAs are subject to the non-discrimination rules contained in I.R.C. Section 105. Those rules prohibit discrimination in favor of highly compensated individuals as to eligibility to participate and the benefits provided by the HRA. Failure to follow these ruleswill result in reimbursements to all highly compensated employees being taxed.

Non-Discrimination Rules

1. Definition of Highly Compensated Individuals a. one of the 5 highest paid officersb. shareholders who own more than 10% of the companyc. one of the highest paid 25% of all employees

2. Eligibility Test a. Plan must benefit at least 70% of all non-excludable employees; orb. Plan must benefit at least 80% of all eligible employees and at least 70% of all non-excludable employees are eligible to join the planc. In order to be excluded for testing purposes, excludable employees also must be excluded from participation in the HRA by the terms of the pland. Excludable employees include:

employees with less than 3 years of service

employees who are under age 25

employees who are part-time or seasonal

employees covered by a collective bargaining agreement

employees who are non-resident aliens with no U.S. source income

3. Benefits Test

all benefits provided for participants who are highly compensated individuals must be provided for all other participants

the easiest way to conform to this requirement is to have uniform benefits for all employees

4. Taxation of Highly Compensated Individuals

Taxed on 100% of benefits not provided to all non-highly compensated individuals

Taxed on a fraction of benefits provided when eligibility test is not met based on amount of benefits provided to all highly compensated individuals divided by amount provided to all participants